1. business and industrial
2. energy
3. oil

Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 1 of 50 Page ID #:1
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R. Rex Parris Esq. (SBN 96567)
[email protected]
Patricia K. Oliver, Esq. (SBN 193423)
[email protected]
Alexander R. Wheeler, Esq. (SBN 239541)
[email protected]
R. REX PARRIS LAW FIRM
43364 10th Street West
Lancaster, California 93534
Telephone: (661) 949-2595
Facsimile: (661) 949-7524
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George Martin, Esq. (SBN 51111)
LAW OFFICES OF GEORGE MARTIN, INC.
5060 California Avenue, Suite700
Bakersfield, California 93303-2026
Telephone: (661) 322-3051
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Attorneys for Plaintiffs
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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COMMITTEE TO PROTECT OUR
AGRICULTURAL WATER; MIKE
HOPKINS, an individual,
)
)
)
)
Plaintiffs,
)
)
v.
)
)
OCCIDENTAL OIL AND GAS
)
CORPORATION, a Texas corporation;
)
WESTERN STATES PETROLEUM
ASSOCIATION (WSPA), a non-profit trade )
)
association; CALIFORNIA
)
INDEPENDENT PETROLEUM
ASSOCIATION (CIPA) a non-profit trade )
)
association; CHEVRON U.S.A. INC., a
)
Pennsylvania corporation; CALIFORNIA
)
DIVISION OF OIL, GAS &
GEOTHERMAL RESOURCES (DOGGR); )
)
EDMUND G. BROWN, an individual;
TIMOTHY R. KUSTIC, an individual;
)
MARK NECHODOM, an individual;
)
LORELEI H. OVIATT, an individual;
)
and DOES 1 through 100,
)
)
Defendants.
)
)
)
Case No.:
COMPLAINT FOR CONSPIRACY
UNDER RICO AND DEPRIVATION
OF CIVIL RIGHTS
DEMAND FOR JURY TRIAL
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27
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_________________________________________________________________________________
COMPLAINT
Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 2 of 50 Page ID #:2
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I.
INTRODUCTION
1.
2
Every month,
3
Occidental and Chevron directly
4
pump 2.63 times more toxic waste
5
water into the San Joaquin Aquifer
6
than oil released into the Gulf
7
during the entire BP spill.1 The
8
California Division of Oil, Gas,
9
and Geothermal Resources
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(DOGGR) plans to allow them to
11
continue for another 21 months.
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This lawsuit is brought to stop the
13
poisoning of the San Joaquin
14
aquifer and to remediate the
15
damage already done to the
16
farmland of Kern County.
17
II.
STATEMENT OF THE
CASE
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2.
The Mediterranean climate of California’s San Joaquin Valley is a fertile
land with two precious resources underground – oil and fresh water.
3.
The availability of both led to great success for farmers and oil companies in
this Valley.
23
24
1
25
26
27
28
This estimate is based upon the monthly average of waste directly injected into the aquifer by Chevron or
Occidental from November 1, 2011 to December 31, 2014. The total according to DOGGR’s records is at least 17.6
billion gallons in that three year and two month time period. This averages out to 463 million gallons each month.
The Government estimated in the BP oil litigation, that BP released 176 million gallons. See,
http://www.usatoday.com/story/money/business/2014/09/04/judge-bps-reckless-conduct-caused-gulf-oilspill/15068955/. The information in this complaint comes from public sources including materials on DOGGR’s
website, from public statements by the Brown administration, and from emails produced in response to Public
Records Act requests. As for the latter, DOGGR redacted much of the information and withheld other emails. Thus,
the extent of the conspiracy and damage will be determined after discovery commences.
_________________________________________________________________________________
COMPLAINT
Page 1
Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 3 of 50 Page ID #:3
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4.
Farmers in the San Joaquin Valley grow 25 percent of all table food in the
5.
Oil companies in this region produce most of the oil in California, making
U.S.
California the third largest oil-producing state.
5
6.
6
hundred years.
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7.
8
9
Farmers and oil companies existed harmoniously in the Valley for over one
The relationship between farmers and oil companies changed a few years
ago in the wake of changes in oil production activities.
8.
Oil production had steadily declined because the oil fields in this region
10
were depleted. About 75% of all oil produced in California requires underground
11
injections to enhance recovery. For example, oil companies inject steam to heat, loosen
12
and then free the oil and water in order to push oil from one area into a production well.
13
9.
Underground injections pose safety risks to oil field workers. The water and
14
steam pushed down must enter an area with enough space to allow the free flow of water
15
and steam underground. Gravity constantly puts pressure on the injection zone, and
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anything injected enters into idle wells. These idle wells act like straws, bringing the
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contaminated water, steam or gases back up, and creating sink holes that kill oil field
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workers. This happened in an oil field above the San Joaquin Valley on June 21, 2011.
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21
10.
Underground injections also pose safety risks to underground water. These
risks are difficult to detect and usually show up first when crops die.
11.
Contamination of water may happen as a result of both conventional and
22
nonconventional oil production. The risk exists because every barrel of oil creates at least
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ten (10) barrels of toxic waste water. This waste is called “salt water,” “brine” or
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“produced water.” The waste water includes all chemicals found underground and all
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chemicals added by the oil companies to enhance oil production.
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12.
Of particular concern to farmers in the Valley is sodium chloride (or salt).
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Sodium chloride levels in water from oil production will often exceed the amount found in
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sea water.
_________________________________________________________________________________
COMPLAINT
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Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 4 of 50 Page ID #:4
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13.
When salt water from oil production enters fresh water used to irrigate
2
crops, at some point, the contamination will be so great the salt water destroys crops, and
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the water becomes toxic to people and
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animals.
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14.
The concerns over the
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safety of the water led to the passage of
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the Safe Drinking Water Act in 1974,
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which requires permits before any
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company injects contaminated water
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underground.
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15.
Oil companies must:
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(1) clean the salt water, (2) inject it into
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water exempt from the regulations
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because it is already too contaminated
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to drink; or (3) inject it underground
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below a confining formation. (See
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photo). Confining formations usually
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consist of shale or some other
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impermeable rock.
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16.
To obtain a permit under
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the Safe Drinking Water Act, oil
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companies must provide geological and
23
engineering studies. These studies are
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reviewed by the Division of Oil, Gas,
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and Geothermal Resources (DOGGR) –
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the California agency responsible for
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issuing permits under the Safe Drinking
28
Water Act.
_________________________________________________________________________________
COMPLAINT
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Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 5 of 50 Page ID #:5
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17.
A conflict began brewing in 2010 when oil companies needed more
injection well permits than ever before in California history.
18.
The State Oil & Gas Supervisor at the time (Elena Miller) required the oil
4
companies to provide the geological and engineering studies. Federal and state law
5
required these documents.
6
19.
The oil companies, however, refused to provide the geological and
7
engineering studies. These studies would highlight two problems. Oil companies were
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injecting directly into an aquifer or injecting near wells with damaged casings that could
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leak into the aquifer. Oil companies would have to hire more workers to fix these
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problems. It also would increase expenses thus lowering profits. In addition, remediating
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the wells would bring unwanted attention to the damage to the water and soil used by
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farmers near the oil fields.
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20.
The State Oil & Gas Supervisor turned to the U.S. Environmental Protection
14
Agency (EPA), the entity that provides federal funds to ensure California’s compliance
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with the Safe Drinking Water Act. The EPA conducted an audit in 2011, which
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concluded that California improperly approved permits for underground injection wells.
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The EPA noted many problems and ordered DOGGR to adopt regulations to “clearly
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require the District Offices to protect USDW’s to the federally-defined standard . . . in the
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permitting, construction, operation, and abandonment of Class II Injection wells.”
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21.
The oil companies still refused to comply with Safe Drinking Water Act,
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and they asked DOGGR for an exception to these rules. One exception requested would
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be for underground injection wells that replaced another injection well or reworked an oil
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well. Most injection permits fall into this exception. Thus, the proposed exception would
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violate the Safe Drinking Water Act and allow for injections with little or no consideration
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to underground water.
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22.
Miller continued to insist on following the regulations in the Safe Drinking
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Water Act. Indeed, violating this law is a criminal offense and could lead to a criminal
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indictment.
_________________________________________________________________________________
COMPLAINT
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Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 6 of 50 Page ID #:6
23.
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The oil companies followed up with a public relations campaign claiming
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Miller caused job losses. The reality – the oil companies did not want the expense
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associated with jobs required to protect the welfare and safety of the communities
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depending on the San Joaquin Aquifer.
24.
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The oil companies complained to Governor Edmund G. Brown whose
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administration met with and ordered Miller to approve the permits as requested by the oil
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companies. She refused to violate the law.
25.
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Brown then “fired” Miller and then boasted: “There will be indictments and
there will be deaths. But we’re going to keep going.”
26.
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Brown transitioned the position of State Oil & Gas Supervisor to a political
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appointment, ensuring that he could direct and control the new State Supervisor. Brown
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appointed Tim Kustic to this position. Kustic financial compensation was higher than any
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prior state supervisor.
27.
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Kustic promised oil
15
companies a “flexible” approach and
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approved permits without the required
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documents. The oil companies went from
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receiving the typical 50 permits a year to
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1,575 permits in 2012 alone.
28.
20
21
2012 was also a pivotal year
for farmers in the San Joaquin Valley.
29.
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Sodium chloride levels
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increased to such a level, the chloride in
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underground water exceeded the maximum
25
contaminant level allowed under the law.
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The excess chloride and total dissolved
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////
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////
_________________________________________________________________________________
COMPLAINT
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solids (both of which are associated with salt water from oil production) started damaging
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orchards.
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4
5
30.
By the end of 2012, one local farmer had to remove his cherry trees. The
picture shown is an example of the damage the trees sustained from excess chloride.
31.
Farmers contacted the local water board in the summer of 2012. The water
6
board told the farmers to report the problem to DOGGR because oil production was the
7
most likely source. The deputy at DOGGR disagreed and told the farmers that the
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injection wells did not cause the problem.
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32.
The farmers then met with Kustic and discussed the problems. Kustic did
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not change the “flexible” approach to approving permits that let DOGGR employees
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decide whether to require all of the geological and engineering studies needed for a
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permit.
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33.
There is also no record in DOGGR’s files indicating that anyone actually
investigated the complaints by the farmers about water contamination.
34.
Kustic’s “flexible” approach also violated the California Environmental
16
Quality Act (CEQA) because it authorized DOGGR employees to use discretion in
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deciding whether to permit the underground injection. Discretionary decisions trigger the
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requirement that DOGGR conduct environmental review under CEQA. DOGGR issued
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most injection permits without following CEQA or giving notice to the public.
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35.
Lorelei Oviatt, the Director of the Kern County Planning and Development
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Department, is responsible for compliance by Kern County under CEQA for all oil
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production activities in Kern County. Oviatt also knew of complaints by farmers and of
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environmental problems before anyone else in the community. She used her position to
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delay public notice of the problems and to block efforts to adopt environmental laws
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protecting Kern County residents.
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36.
Oviatt received a telephone call from a Brown appointee, Mark Nechodom,
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who replaced Miller’s boss (Derek Chernow) as the Director of the California Department
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of Conservation. Nechodom telephoned Oviatt about CEQA.
_________________________________________________________________________________
COMPLAINT
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37.
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Nechodom afterwards emailed to thank Oviatt for her support and noted that
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he was “delighted to have you and Kern Co. as a
3
partner (unindicted co-conspirator?).” (Emphasis
4
added.) Oviatt agreed with Nechodom in email – “We
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all have the same goal.”
38.
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DOGGR’s flexible approach became
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notorious on February 6, 2015 when DOGGR
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admitted it approved 532 permits to oil companies
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injecting directly into water protected by the Safe
10
Drinking Water Act. DOGGR reported that 490 of the
11
wells still have water of sufficient quality to be used
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for drinking or farming. DOGGR claimed, however,
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there was no contamination.
39.
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On May 15, 2015, DOGGR dropped 80
15
wells off the list of 490. DOGGR now admits,
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however, that 53 “injection wells are potentially impacting water supply wells.”2 DOGGR
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further admits that 207 “injection wells have injection zones that are less than 1500 feet
18
below ground surface.” 3
40.
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Since the termination of Miller and Chernow by Brown, Occidental and
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Chevron injected an average of 463 million gallons of contaminated water into fresh water
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each month. An example of the direct injection process is shown in this photo.
41.
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DOGGR afterwards asked the United States Environmental Protection
23
Agency to allow the oil companies to inject into protected water (including the water in
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the region near the farms shown on the first page of this complaint) until February 15,
25
2017.
26
27
28
2
See, May 15, 2015 letter to Michael Montgomery at the EPA from Dr. Steve Bohlen and Jonathan Bishop
at p. 2.
3
Id. at p. 3.
_________________________________________________________________________________
COMPLAINT
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42.
Notice of the rampant contamination of the San Joaquin Valley Aquifer led
2
to a hearing before the California Senate. Nechodom took the stand, telling the California
3
Senate that DOGGR had not focused on whether oil companies directly injected into
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federally protected waters (specifically aquifers not exempted from the Safe Drinking
5
Water Act) because DOGGR was so focused on hydraulic fracturing. This is directly
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contracted by emails from Kustic sent in June of 2012 telling the EPA hat hydraulic
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fracturing had the media’s attention, but “the bulk of our resources are going towards the
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UIC program improvements.”
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43.
DOGGR further provided advance notice (prior to the public disclosure) of
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all regulations being considered under SB4, the bill proposed by Senator Pavley to require
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public disclosure of chemicals used in hydraulic fracturing. The regulations ultimately
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created in the partnership between DOGGR and the Oil Companies to create a loophole
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that exempted most well stimulation from SB4. Such activities took place outside of the
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public sphere.
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44.
In sum, state and local government officials (including DOGGR, Brown,
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Nechodom, Kustic, and Oviatt) and the Oil Companies named as Defendants did “all have
17
same goal” – the permitting of injection wells in violation of the Safe Drinking Water Act.
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DOGGR issued these discretionary permits outside of the public scrutiny, also violating
19
the California Environmental Quality Act. There were no indictments given the
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conspiracy reached to the highest of California’s government officials.
21
45.
Members of the Enterprise took actions to avoid public disclosure of the
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indictable acts described herein. They held secret meetings – without public notice – to
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discuss legislative and litigation matters. In some cases, this led to early disclosure of
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proposed regulations to oil companies most engaged in nonconventional oil stimulation
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methods to obtain their approval of regulations before public disclosure. Finally, the
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administration of Governor Brown took over responsibility for providing documents in
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response to Public Records Act requests and then withheld or redacted information to
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avoid public disclosure.
_________________________________________________________________________________
COMPLAINT
Page 8
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46.
Defendants Brown, Nechodom, Kustic, Oviatt, DOGGR, WSPA, CIPA,
2
OCCIDENTAL OIL AND GAS CORPORATION, CHEVRON U.S.A. INC., and others
3
known and unknown, formed an “enterprise” (“the Enterprise”) to achieve through illegal
4
means the goal of increasing oil production and maximizing profits and tax revenue by
5
allowing the Oil Companies to inject salt water into fresh water in violation of the Safe
6
Drinking Water Act. The Enterprise sought to minimize labor expenses that would have
7
arisen if they followed the law while at the same time taking federal funds under the Safe
8
Drinking Water Act. The Enterprise engaged in numerous indictable acts including:
9

18 U.S.C. § 371 – conspiracy to defraud the United States by obtaining federal
funds in 2012, 2013, and 2014 under the Safe Drinking Water Act;
10

18 U.S.C. §§ 241 – intimidation of witnesses engaged in free exercise of speech
or Constitutional right to protect their community from water contamination;

18 U.S.C. § 1341 – mail fraud arising from the use of U.S. mail to send false
letters suggesting job losses;

18 U.S.C. § 1343 – wire fraud arising from sending emails with false
information and utilizing telephones and emails to execute;

18 U.S.C. § 1346.43 – depriving the community of honest government services
by misappropriating federal funds for protection of water, making
misrepresentations at the California Senate hearing, interfering with local
communities trying to protect their water, participating in secreting meetings
and communications with regulated companies to adopt public policies,
violating the California Environmental Quality Act, and withholding
information under the California Public Records Act; and

18 U.S.C. § 1512 (b) and 1513(b) –intimidating and threatening witnesses who
discovered contaminated water.
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47.
Because of these actions, the Enterprise deprived members of the Committee
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to Protect Our Agricultural Water fresh water, fair opportunities to earn an income, and
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honest government services. The Committee brings this suit against Oil Companies who
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knowingly inject toxic waste water into the San Joaquin Valley aquifer. The Committee
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also seeks an injunction mandating the public disclosure of any studies conducted by the
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State and Local Officials who conspired with the Oil Companies to approve these
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injections. When will the toxic waste injections reach a tipping point and contaminate
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forever the fresh water needed by all Californians and by members of the Committee?
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The Committee further seeks to recover lost income and costs for remediation of
_________________________________________________________________________________
COMPLAINT
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contaminated water currently destroying water quality. And the Committee seeks a
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declaration revoking any illicitly obtained permits and requiring compliance with the laws
3
designed to protect the water
4
5
III.
JURISDICTION
48.
This court has subject matter jurisdiction under 28 U.S.C. § 1331 over
6
Plaintiffs’ claims for violations of the RICO Act, 18 U.S.C. § 1961 et seq. and under 28
7
U.S.C. §§ 1331 and 1343(a)(3) for violations of 42 U.S.C. § 1983.
8
49.
This Court has personal jurisdiction as to Defendant Occidental Oil and Gas
9
Corporation (“Occidental”), in so far as (a) Occidental has a corporate headquarters in Los
10
Angeles, California; (b) conducts substantial activities in California; and (c) engaged in
11
conduct originating in California that caused Plaintiffs’ injuries. Occidental (and its
12
subsidiaries) appear to have injected more contaminated water into the San Joaquin Valley
13
aquifer than any other oil company.
14
50.
This Court has personal jurisdiction as to Defendant Western States
15
Petroleum Association, a non-profit trade association (“WSPA”) in so far as (a) WSPA is
16
a California non-profit trade association; (b) has its principal place of business in
17
California; (c) conducts substantial activities in California; (d) engaged in conduct
18
originating in California that caused Plaintiffs’ injuries; (e) has availed itself of the
19
protections of the laws of this state.
20
51.
This Court has personal jurisdiction as to Defendant California Independent
21
Petroleum Association, a non-profit trade association (“CIPA”) in so far as (a) CIPA is a
22
California non-profit trade association; (b) has its principal place of business in California;
23
(c) conducts substantial activities in California; (d) engaged in conduct originating in
24
California that caused Plaintiffs’ injuries; (e) has availed itself of the protections of the
25
laws of this state.
26
52.
27
This Court has personal jurisdiction as to Defendant Chevron U.S.A.
Corporation (“Chevron”), in so far as (a) has a corporate headquarters in California; (b)
28
_________________________________________________________________________________
COMPLAINT
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conducts substantial activities in California; (c) engaged in conduct originating in
2
California that caused Plaintiffs’ injuries.
53.
3
This Court has personal jurisdiction as to Defendant California Division of
4
Oil, Gas, and Geothermal Resources (“DOGGR”), in so far as; (b) DOGGR is a California
5
State Agency; (c) engaged in conduct originating in California that caused Plaintiffs’
6
injuries.
54.
7
8
This Court has personal jurisdiction as to Defendant Edmund G. Brown,
who lives in California.
55.
9
This Court has personal jurisdiction as to Defendant Timothy R. Kustic, who
10
served as the State Oil & Gas Supervisor from November 2011 to February 2014 and lives
11
in California.
56.
12
This Court has personal jurisdiction as to Defendant Lorelai Oviatt. She
13
lives in California.
14
IV.
VENUE
57.
15
Further, venue is proper in this judicial district under 28 U.S.C. § 1391(d)
16
because California is a state which has more than one judicial district and Defendant
17
Occidental, is a corporation subject to personal jurisdiction at the time this action
18
commenced, and therefore Occidental resides in this judicial district due to its contacts
19
with this judicial district.
58.
20
21
Venue is proper in this judicial district under 28 U.S.C. § 1391 and 18
U.S.C. § 1965(a). Defendant WSPA has offices in the Central District.
59.
22
Venue is also proper in this judicial district under 28 U.S.C. § 1391(b)
23
because a substantial part of the events or omissions giving rise to the claims occurred in
24
this District.
25
V.
THE PARTIES
26
A.
Plaintiffs
27
60.
COMMITTEE TO PROTECT OUR AGRICULTURAL WATER
28
(“Committee” or “Plaintiffs”) is a citizen organization comprised of farmers, business
_________________________________________________________________________________
COMPLAINT
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owners, and individuals concerned about the environment and quality of life in California.
2
The Committee has undertaken public outreach, sought public records, and taken other
3
advocacy efforts targeting the permitting of underground injection wells. Members of the
4
Committee regularly use the underground water and rely upon the clean quality of the air,
5
land, and water in operating their business and farms that grow food products, including
6
almonds, cherries, and pistachios. These interests are protected when the agricultural
7
areas are maintained, and they are adversely affected or destroyed by excess oil
8
production and the resulting pollution of the air, land, and water.
9
61.
The ability of the Committee and its members, including the individual
10
Plaintiffs, to engage in farming and in the advocacy on behalf of farmers is injured by the
11
Oil Companies failure to comply with the Safe Drinking Water Act, California
12
Environmental Quality Act, and the California Code of Regulations. In addition, by using
13
the mails and wires to violate these laws, Defendants violated the Federal RICO statutes,
14
all to the detriment of the Committee members. By violating these laws, rules, and
15
regulations, the Oil Companies are causing unnecessary destruction of agriculture and
16
farmland, and unnecessarily polluting the air, land, and water in Kern County.
17
62.
Plaintiff Mike Hopkins is a farmer in Kern County, overseeing the
18
management of several orchards including his family’s farming operations. The income
19
from his farming operations has declined as a result of lower yields – he ultimately had no
20
choice but to remove an entire orchard of cherry trees due to chloride contamination. This
21
contamination caused a substantial decline in yield and sustainability.
22
B.
Defendants
23
63.
Occidental is a corporation organized and existing under the laws of the
24
State of Texas and having a principal place of business at 5 Greenway Plaza, Houston,
25
Texas, 77046, whose registered agent for service of process is located in Los Angeles.
26
Occidental's headquarters for most of the relevant time period were in Los Angeles.
27
28
64.
WSPA is, according to their website, “a non-profit trade association that
represents companies that account for the bulk of petroleum exploration, production,
_________________________________________________________________________________
COMPLAINT
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refining, transportation and marketing in the five western states of Arizona, California,
2
Nevada, Oregon, and Washington.” (https://www.wspa.org/what-is-wspa). Members of
3
WSPA include, but are not limited to, Chevron Corporation, , and Occidental Oil and Gas
4
Corporation. (https://www.wspa.org/member-list). WSPA is a non-profit organized and
5
existing under the laws of the State of California and has a principle place of business at
6
1415 L Street, Suite 600, Sacramento, California 95814.
7
65.
CIPA is, according to their website, “a non-profit, non-partisan trade
8
association representing approximately 500 independent crude oil and natural gas
9
producers, royalty owners, and service and supply companies operating in California.
10
[CIPA] members represent approximately 70% of California’s total oil production and
11
90% of California’s natural gas production.”
12
(http://www.cipa.org/i4a/pages/index.cfm?pageid=91). CIPA is a non-profit organized and
13
existing under the laws of the State of California and has a principle place of business at
14
1001 K Street, 6th Floor, Sacramento, California, 95814.
15
66.
Chevron is a corporation organized and existing under the laws of the State
16
of Pennsylvania and having a principal place of business at 6001 Bollinger Canyon Road,
17
San Ramon, CA 95483.
18
67.
The California Division of Oil, Gas, and Geothermal Resources
19
(“DOGGR”) is a state governmental entity which has been delegated certain permitting
20
responsibilities under state and federal environmental laws. Among other items, DOGGR
21
must “address the needs of the state, local governments, and industry by regulating
22
statewide oil and gas activities with uniform laws and regulations.” DOGGR also
23
“supervises the drilling, operation, maintenance, and plugging and abandonment of
24
onshore and offshore oil, gas, and geothermal wells, preventing damage to: (1) life, health,
25
property, and natural resources; (2) underground and surface waters suitable for irrigation
26
or domestic use; and (3) oil, gas, and geothermal reservoirs.”
27
68.
Brown is the governor of California during the relevant time period.
28
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69.
1
2
Nechodom is the Director of the California Department of Conservation
during the relevant time period.
3
70.
Kustic was the State Oil & Gas Supervisor during the relevant time period.
4
71.
Oviatt was the Director of the Kern County Planning and Development
5
Department.
72.
6
Defendants, Does 1 through 100, inclusive, are sued under fictitious names.
7
Their true names and capacities are unknown to Plaintiffs. When their true names and
8
capacities are ascertained, Plaintiffs will amend this Complaint by inserting their true
9
names and capacities. Plaintiffs is informed and believes and alleges that each of the
10
fictitiously named Defendants are responsible in some manner for the occurrences alleged,
11
and that Plaintiffs’ damages as alleged were proximately caused by such Defendants.
73.
12
Defendants Brown, Nechodom, Oviatt, Kustic, DOGGR, WSPA, CIPA,
13
Occidental, Chevron, and DOES 1 through 100 (collectively referred to as “Defendants”)
14
were in some manner responsible for the acts alleged and the harm, losses and damages
15
suffered by Plaintiffs as alleged. Plaintiffs also informed and believes that, while
16
participating in such acts, each Defendant was the agent, alter ego, conspirator, and aider
17
and abettor of the other Defendants and was acting in the course and scope of such agency
18
and/or acted with the permission, consent, authorization or ratification of other
19
Defendants.
20
VI.
CLAIMS FOR RELIEF
21
A.
Environmental Setting
22
74.
The San Joaquin Valley is blessed with two precious underground resources
23
– fresh water and oil. Both resources led to the development of some of the best farms
24
and oil fields in the world.
25
75.
California produces nearly half of all of the fruits, nuts, and vegetables in the
26
United States. Twenty-five percent is grown in just one California region, the San Joaquin
27
Valley. The Mediterranean climate and the availability of abundant fresh water in the San
28
Joaquin Valley Aquifer make this prime and unique farmland.
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1
76.
The oil fields in and around the Valley produce up to 75% of all oil in
2
California, and because the oil fields are mature, they are depleted. This means they
3
require substantial underground injections to enhance or stimulate the oil production.
4
77.
These underground injections happen near the fragile San Joaquin Aquifer.
5
If too much waste is injected, or if the waste leaks into the aquifer, it will reach a tipping
6
point that make it impossible to restore the aquifer for use by the farms or Californians.
7
78.
All oil production creates toxic waste that may contaminate water used for
8
drinking and farming if the waste is not cleaned before disposal or properly disposed
9
underground.
10
79.
Conventional oil production alone produces an average of one (1) barrel of
11
oil for every ten (1) barrels of toxic waste (also called “salt water” or “brine” or “produced
12
water”).
13
80.
Oil companies historically either re-injected salt waste water underground or
14
discarded it in above ground pits. Salt waste water – whether placed on the ground in pits
15
or injected underground – can enter fresh water supplies. This concern led to the passage
16
of the Safe Drinking Water Act, a law proposed, passed, and strengthened by three
17
Republican Presidents. Congress, with the support of President Ronald Reagan, adopted
18
amendments to strengthen the Act in 1986.
19
81.
Many states, like California, entered agreements with the United States
20
agreeing to adopt and enforce laws as part of an Underground Injection Control program
21
(“UIC”). In 1989, the U.S. Government Accountability Office (a nonpartisan
22
Congressional agency that investigates how federal funds are spent) concluded that
23
existing programs were not protecting underground water from injections by oil
24
companies. “Contamination is difficult to detect.” The U.S. General Accounting Office
25
(now Government Accountability Office) also noted that monitoring wells were of
26
“limited value” for large aquifers.
27
28
82.
Most often, contamination was discovered only after the “water supplies
became too salty to drink or crops were ruined.” See, July 1989, “DRINKING
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1
WATER: Safeguards Are Not Preventing
2
Contamination From Injected Oil and Gas
3
Wastes” (Emphasis added.)
4
83.
The U.S. Government
5
Accountability Office identified two causes
6
of water contamination from oil injection
7
wells. First, oil companies might directly
8
inject contaminated salt water into fresh
9
water. Or salt water might leak directly
10
into fresh water.
11
Geological studies
12
demonstrate the location of
13
fresh water. California
14
requires these studies to
15
confirm that oil companies do
16
not inject toxic waste water
17
into fresh water. See, 14 CCR
18
1724.7(b).
19
84.
Second, toxic water is injected
20
deep underground but can travel “into
21
improperly plugged abandoned wells” near
22
the injection wells. This happens as gravity
23
pushes downward on the injected water that
24
then travels back up idle wells (much like
25
any fluid that flows up a straw when the
26
pressure is unequal).
27
 Engineering studies and casing
28
diagrams of nearby idle wells
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1
identify problems that could lead to this contamination. California requires oil
2
companies to provide engineering studies and casing diagrams to obtain waste
3
disposal injection well permits. 14 CCR 1724.7(a).
4
 This is part of what is called an Area of Review or “AOR.”
5
 To obtain a permit (and avoid leaking into the aquifer as shown in this photo), oil
companies must remediate any nearby idle wells that have damaged casings.
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
B.
Increased Underground Injections
85.
Kern County is home to the third largest oil field in the United States,
Midway-Sunset Oil Field, which is the location of the second largest oil disaster in
history. In 1910, a geyser of crude oil erupted in this oil field and spewed 378 million
gallons of oil for 18 months.
86.
A recent photo of the Midway Sunset oilfield is shown below,
demonstrating the density of oilfield operations in some parts of Kern County.
87.
After that disaster, California formed the Division of Oil & Gas (later the
Division of Oil, Gas & Geothermal Resources (“DOGGR”) to supervise drilling and
“preventing damage to: (1) life, health, property, and natural resources; (2) underground
27
28
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1
and surface waters suitable for irrigation or domestic use; and (3) oil, gas, and geothermal
2
reservoirs.”
3
88.
DOGGR is also the state agency responsible for making sure oil companies
4
in California comply with the underground injection control (UIC) program and live up to
5
their obligations under the Safe Drinking Water Act. UIC programs regulate the
6
construction, operation, permitting, and closure of all injection wells that place fluids
7
underground.
8
89.
In recent years, DOGGR reported a decrease in conventional oil production
9
in California and an increase in well stimulation through underground injections of steam
10
and water.
11
90.
One type of injection well requires injection of steam into the oil well for a
12
period of days or weeks. The well is closed in with steam until the heat loosens and frees
13
the oil. Hot steam from this process can migrate up nearby idle wells (just like salt water
14
migrates up nearby idle wells when injected for disposal). This is called cyclic steaming
15
to stimulate oil production.
16
91.
By January of 2011, oil companies in California also hoped to recover oil
17
from the Monterey Shale. News broke out later that year suggesting that the Monterey
18
Shale contained more oil than half of the United States recoverable shale oil.
19
92.
Reaching the shale oil would require hydraulic fracturing. Hydraulic
20
fracturing (or “fracking”) is the pressurized injection of water and toxic chemicals deep
21
underground to fracture geologic formations. A propping chemical or sand is then
22
pumped downward to keep the cracks open and release oil. Fracking produces large
23
volumes of waste including produced water, drilling fluids, foam treatment waste, oily
24
sludge, and waste gas.
25
C.
Audit of DOGGR’s Operations
26
93.
In 2008, Governor Arnold Schwarzenegger named Derek Chernow as chief
27
deputy director of the Department of Conservation. Chernow hired Elena Miller to serve
28
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1
as the State Oil & Gas Supervisor (the senior staff member in charge of DOGGR’s
2
operations) in 2009.
3
94.
The Schwarzenegger administration counted on Miller and Chernow to
4
improve the quality of California’s compliance with the Safe Drinking Water Act. This
5
was needed at the time because of the increased need for injection well permits and
6
increased waste.
7
95.
The United States Environmental Protection Agency (“EPA”) is the federal
8
agency responsible for ensuring California’s underground injection control (UIC) program
9
complies with the Safe Drinking Water Act.
10
96.
The EPA began to audit DOGGR’s program in 2010.
11
97.
Miller learned in the process that DOGGR was not properly approving
12
permits. Among other problems, oil companies failed to provide the following for
13
injection well permits:
14
o
Engineering study & casing diagrams. Oil companies must submit
casing diagrams for all wells affected by the stimulation treatments, and
an engineering study to show that the project would “not have an
adverse effect . . . or cause damage to life, health, property, or natural
resources.” CCR 1724.7(a)(4).
o
Geologic mapping. Oil companies must provide geologic studies of the
wells and an injection plan regulating the underground injections. CCR
1724.7(b).
o
Testing of casing for leaks. Oil companies must conduct and invite
DOGGR to observe mechanical integrity tests. CCR 1724.10(j).
o
Pressure limits. Oil companies must submit injection plans and
determine the “maximum allowable pressure” for all injections. CCR
1724.10(i). Pressure limits ensures that casings are strong enough to
avoid well failure.
15
16
17
18
19
20
21
22
23
98.
Miller faced internal resistance from DOGGR employees in trying to
24
regulate underground injections. One former deputy, Randy Adams, had a practice of
25
approving injection wells. This included approvals of wells to inject poison gas
26
(hydrogen sulfide) without following the safety rules or regulations. Hydrogen sulfide is a
27
highly toxic and deadly gas. Exposure is noticed immediately but hydrogen sulfide
28
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1
deadens the sense of smell. People exposed will quickly not realize hydrogen sulfide is
2
reaching deadly levels until it is too late.
3
99.
Miller also faced external resistance from oil companies.
4
100.
One oil company (PXP) had to comply with the regulations to obtain new
5
permits for injections. The information provided by PXP to DOGGR demonstrated that
6
the oil company had to remediate eleven (11) wells. PXP nonetheless demanded
7
“an injection permit before remediation, since it could take a year to remediate all the
8
wells.” (Emphasis in original email from Chernow.) PXP told Chernow on a telephone
9
call on March 29, 2011 it was being “pressured by other operators who don’t want to
10
see a precedent for having to remediate wells as a condition for permitting!”
11
101.
Chevron also objected to compliance and remediation in the Spring of 2011.
12
It refused to stop injections, noting in March 14, 2011 email to DOGGR Chevron’s refusal
13
to stop injecting near wells with mechanical integrity issues.
14
102.
Chevron’s failure to follow the law led to the death of an oil field worker on
15
June 21, 2011. Steam, hot water, and hydrogen sulfide percolated to the surface of an
16
abandoned well in the Midway Sunset field and created a sink hole that sucked Chevron
17
construction supervisor, David Taylor, underground. DOGGR admitted that “damaged
18
well casings may be . . . partially responsible,” but it had to investigate “from a distance of
19
approximately 50 to 60 yards.” Chevron’s violation of the Safe Drinking Water Act
20
resulted in a small $350 fine.
21
103.
The reluctance of oil operators to comply with the Safe Drinking Water Act
22
was confirmed on July 18, 2011, when the United States Environmental Protection
23
Agency sent Miller the results of an audit of California’s underground injection control
24
program. The EPA concluded that California’s regulations and practices did not
25
adequately protect water from improperly plugged wells and wells that “lack of cement in
26
the casing/wellbore annulus.” The EPA highlighted other “program deficiencies”:
27
28
o
DOGGR failed to “clearly require the District Offices to protect” water
to federally-defined standards.
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1
2
o
DOGGR failed to conduct the proper area of review “for injection wells
throughout the state.”
o
DOGGR failed to do the proper test for determining “maximum surface
injection pressure” and needed to test pressure levels to ensure casings
remained intact.
3
4
The EPA asked that DOGGR provide an action plan for corrections by September 1, 2011.
5
D.
Oil Companies Refuse to Comply
6
104.
Compliance with the Safe Drinking Water Act would require that the oil
7
companies conduct an area of review (AOR) and remediate wells needing repairs.
8
Remediation would be the only way DOGGR could permit the salt water injection wells to
9
protect fresh water. This in turn would focus attention on problems with underground
10
injection activity like hydraulic fracturing.
11
12
13
105.
After the audit, the oil companies demanded that Miller approve injection
permits without the required engineering studies or casing diagrams.
106.
Occidental admitted on July 26, 2011 that “[a] total of 22 wells did not pass
14
the [zonal isolation] criteria.” But Occidental refused to provide the casing diagrams for a
15
lawful area of review (AOR) for permits to inject in 18 wells in the Wilmington field.
16
107.
Western States Petroleum Association (WSPA) then stepped into the fray on
17
behalf of its members. WSPA represents all major Oil Companies including Defendants
18
Chevron, and Occidental. WSPA emailed to falsely complain about DOGGR’s “new
19
policy.”
20
108.
The California Natural Resources Agency (the agency overseeing the
21
California Department of Conservation of which oversees the Division of Oil, Gas and
22
Geothermal Resources). On August 8, 2011, the Natural Resources Agency pointed out
23
the falsity of this statement by WSPA:
24
“I would like to understand why this is being seen as something new. It’s
been on the books for over 25 years.
25
26
27
28
14 CCR 1724.7 was approved . . . in 1978 . . .amended in 1984 and then there
were some typos corrected in 1996.
Pursuant to title 14, section 1724.7, subdivision (a), every injection project
must be supported by an engineering study that includes casing
diagrams for all idle, plugged and abandoned, and deeper-zone
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producing wells within the area affected by the project. The regulation
requires casing diagrams in the engineering study evidencing that plugged
and abandoned wells in the area will not have an adverse effect on the project
or cause damage to life, health, property, or natural resources. If there are
wells within the area of influence of proposed injection that could allow
injection fluids to migrate outside of the intended zone, then approval to
conduct injection operations would be conditioned on addressing those
problem wells.
1
2
3
4
5
. . . . We’ve already changed the process on our end by virtue of the fact that
companies are being notified when an application is submitted whether there
is information that is missing. The problem, at this point, appears to be that
the industry is not responding to that notification and providing the missing
information. Instead, they want to fight about whether the
required/requested information is necessary.” (First emphasis in the
original; second added.)
6
7
8
9
10
109.
Western States Petroleum Association (WSPA) then set up a meeting to be
11
held on September 12, 2011, with Miller to discuss a document entitled the “Proposed
12
Interim Solution.” This solution was prepared by an attorney, Meg Rosegay, representing
13
WSPA. The Proposed Interim Solution recommended developing a work group to discuss
14
the underground injection control UIC program.
15
110.
WSPA’s Interim Solution proposed that if an operator sought an injection
16
well permit for conversion of a prior oil well, DOGGR must approve the permit without
17
an area of review (AOR). No geological studies or engineering studies to confirm the
18
safety of drinking water. Because most waste disposal wells are reworks of old wells, this
19
was a large loophole.
20
21
22
111.
Miller would not approve WSPA’s Interim Solution and sought guidance
from the United States Environmental Protection Agency.
112.
The EPA confirmed that the “Interim Proposal” would violate the Safe
23
Drinking Water Act. Miller and Chernow stood firm in the wake of the EPA’s
24
confirmation and refused to approve injection wells without the proper engineering and
25
geological studies.
26
E.
Discretionary Authority to Permit Injection Wells
27
113.
The oil companies then asserted the State Supervisor of Oil & Gas has the
28
discretion to approve the permits as requested by WSPA and CIPA. For instance, PXP
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1
emailed Miller on October 10, 2011 regarding the discretion to operate a “Phased
2
Corrective Action” for underground permits.
3
114.
If the UIC permitting process is discretionary, DOGGR must comply with
4
the California Environmental Quality Act (“CEQA”). Pub. Res. Code § 21080(a). CEQA
5
requires each state agency to prepare and Environmental Impact Report if a discretionary
6
project may have a significant impact on the environment. Pub. Res. Code § 21002.1,
7
21061, 21080(a). If a project would not have a significant effect on the environment, the
8
agency must adopt a “negative declaration.” Pub. Res. Code § 21064, 21080(c). In
9
limited circumstances, an agency may approve a project as exempt from CEQA if the
10
project falls within one of the “categorical exemptions.” Cal. Code Regs. 14 §
11
15061(b)(2), 15300-33. These exemptions apply to projects within predefined activities.
12
Pub. Res. Code § 21084(a); Cal. Code Reg. 14 Pub. Res. §15300.
13
115.
Miller did not have the discretionary authority to permit wells without
14
complying with CEQA, and full environmental review would subject the oil companies to
15
even more scrutiny and long delays for the public notice process.
16
F.
Mail and Wire Fraud by Oil Companies
17
116.
WSPA representatives worked with representatives from California
18
Independent Petroleum Association (“CIPA”), a non-profit, non-partisan trade association
19
representing approximately 500 independent crude oil and natural gas producers, royalty
20
owners, and service and supply companies operating in California.
21
117.
CIPA followed with a meeting and threat to file suit on behalf of the
22
industry against DOGGR because of “unnecessary delays in Sacramento’s review of oil
23
field injection projects.”
24
118.
CIPA used electronic wires to misrepresent the problem – the delay arose
25
from the oil companies’ refusal to comply with the Safe Drinking Water Act, including
26
industry wide refusal to provide casing diagrams.
27
28
119.
CIPA and WSPA also organized a letter writing campaign to the governor
claiming “that a minimum of 3,000 jobs will be lost from the contractor workforce . . . if a
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1
solution to issuing permits is not found.” The letters were form letters distributed to all
2
members to send.
3
120.
The claim of lost jobs was false.
4
121.
Compliance with the underground injection control UIC regulations should
5
have increased jobs. More companies would have had to repair damaged wells or drill
6
new injection wells. Indeed, there were 9,849 permits issued in 2011, more than any year
7
except 2013.
122.
8
Oil companies also experienced record jumps in profits and revenues in
9
2011, a trend noticed as early as October 28, 2011 when the LA Times reported that:
10
“Occidental Petroleum’s earnings rose 50% and its revenue was up 26%, Exxon Mobil
11
saw increases of 41% in profit and 32% in revenue, and Royal Dutch Shell says its
12
earnings doubled and revenue rose 36%.”
123.
13
The oil companies knew the falsity of the representations about permitting
14
and job losses. They nonetheless, utilized electronic wires and the United States Mail to
15
send fraudulent letters suggesting that failing to issue permits cost the people in California
16
jobs.
17
G.
The Conspiracy
18
124.
Beginning in 2011, the Oil Companies kept close attention to the EPA audit.
19
The Oil Companies knew that they ignored the regulations to protect underground water,
20
and if the public knew of the risks, the Oil Companies would face massive liability for
21
potential contamination of groundwater (historical and future).
22
125.
The Oil Companies also knew that they needed government approvals to
23
engage in hydraulic fracturing. If the public knew of their failure to comply with
24
underground injection control (UIC) requirements for waste water, the Oil Companies
25
would be subject to greater scrutiny for hydraulic fracturing – waste water from fracking
26
includes added chemicals. The Oil Companies also knew that they needed landowners to
27
approve the hydraulic fracturing, and if these landowners knew of these problems, the
28
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1
landowners would not allow the Oil Companies to proceed with actions that would
2
damage the farms and water supplies.
3
126.
By at least October 27, 2011, the Oil Companies agreed that no company
4
would provide DOGGR with the documents to show protection of fresh water including
5
(1) geological studies; (2) engineering studies; or (3) casing diagrams. This continues to
6
the present day.
7
8
9
10
11
127.
In early October of 2011, Occidental also directly contacted Governor
Brown and told him to fire Miller and Chernow.
128.
Brown’s office then requested records about the permitting process as it
related to Occidental.
129.
On October 14, 2011, Chernow sent documents regarding Occidental’s
12
California operations to the senior officials handling the inquiry from Governor Brown.
13
Chernow emailed that he was “willing to follow any direction as required. If direction is
14
different than what the Department is currently pursuing, I would appreciate as explicit
15
direction as possible.”
16
130.
Less than a week later, on October 19, 2011, Occidental started reporting
17
that “it cannot get the permits it needs for new drilling projects in California.” This was a
18
misrepresentation of the problems arising from Occidental’s own decision not to follow
19
the law.
20
131.
On October 27, 2011, Occidental’s environmental engineer admitted to
21
Chernow it had “the necessary information . . . However, he’s been told to stand down (by
22
a lawyer is all I know) and not give us anything. There is apparently a meeting in
23
Bakersfield at Oxy’s offices this afternoon to discuss whether they give us what we need
24
or continue to give us nothing.”
25
132.
Governor Brown’s office and his senior advisor, Cliff Rechtschaffen,
26
scheduled a meeting with Miller and Chernow held the next day. Rechtschaffen notified
27
them that DOGGR must immediately fast track permit approval. His team presented a
28
document entitled the Temporary Assistance Program or TAP. Miller sought guidance
_________________________________________________________________________________
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1
from the United States Environmental Protection Agency about the list of demands. The
2
EPA representative reviewed and commented on it, and Miller responding by writing she
3
“I agree with your point that this has similarities to what was prepared by [Western States
4
Petroleum Association ] WSPA.”
5
133.
On November 2, 2011, Miller and Chernow went to another meeting which
6
Rechtschaffen joined over the phone. Miller told Rechtschaffen the proposal violated the
7
Safe Drinking Water Act. Rechtschaffen told her this was an order from Governor
8
Brown.
9
H.
Deprivation of Honest Services by Government
10
134.
Brown utilized electronic wires to report he fired Miller and Chernow on
11
November 3, 2011. DOGGR used emails and electronic wires to promise flexibility in
12
permitting.
13
135.
On December 2, 2011, Daniel Dudak emailed the team at DOGGR to
14
provide an update on the underground injection control program. He wrote to notify the
15
team that DOGGR could bypass the AOR process for the Wilmington Field, which was
16
owned by Occidental:
17
18
19
20
21
22
23
24
25
26
27
28
As was emphasized in the beginning of Friday morning’s UIC Program
Update meeting, the UIC program is in a state of flux and will likely be
changed or modified again. We must all realize that there is not a perfect box
in which to package our program. Not all fields, Districts, wells, etc. are the
same, and interpretations of laws and regs, let alone geology and engineering,
vary among individuals inside and out of the Division, industry, the general
public, environmental groups, Legislature, Gov’s office, etc. We deal with
very complex issues, many of which are unique. It is challenging, to say the
least, to be open to uncertainty. You are all very talented and knowledgeable
individuals… Please remember to be flexible and professional throughout
this process.
That being said, Ken and I had a follow‐up discussion with HQ regarding
Friday morning’s videoconference with HQ. Based on our follow‐up
discussion, the path forward in Inglewood and Wilmington –
THUMS/Tidelands is this, generally, with more information to come:
***
• Wilmington AOR process will continue as it has with some modifications –
where an injection well is being replaced, and there is no expansion to
injection, providing there are no obvious overriding considerations such as
numerous sheared‐off well bores in the area (one example), we can bypass
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the AOR process and issue a permit. This should be done on a case‐by‐
case basis using good engineering judgement. For AORs, HQ will review for
comments only; D1 will determine final remediation list and permit.
1
2
136.
3
The Wilmington project related to the same Occidental project that led to its
4
calling Brown and demanding the termination of Miller and Chernow. Occidental did not
5
have to comply with the Safe Drinking Water Act.
137.
6
7
A month later, on December 5, 2011, Brown announced his tax increase
proposition.
138.
8
The oil companies immediately supported Brown’s tax increase proposition
9
– Occidental contributed its first $250,000 by January 31, 2012. Chevron contributed
10
$100,000 by May 19, 2012. In total, the oil companies contributed over $1 million and
11
agreed not to oppose the tax increase.
139.
12
Governor Brown also received substantial direct support from Occidental –
13
this oil company contributed over $835,000 to the Governor’s campaign programs since
14
2006.
15
140.
Brown also transitioned the position of State Oil & Gas Supervisor to a
16
political appointment, guaranteeing Brown’s control over the new supervisor. Contrary to
17
custom, his administration did not announce the appointment on the website to allow for
18
other candidates to apply.
19
141.
Brown ultimately appointed Tim Kustic to replace Miller. Kustic demanded
20
and received the highest salary ever paid to the state supervisor. Brown also appointed
21
Mark Nechodom to replace Chernow as the Director of the California Department of
22
Conservation.
23
142.
In January of 2012, Governor Brown told the public that “There will be
24
indictments and there will be deaths. But we’re going to keep going.” (Emphasis added.)
25
No one was indicted with the change to regulators who agreed as Kustic did to an
26
approach that violated the Safe Drinking Water Act.
27
28
143.
Kustic utilized electronic wires in January 2012 and promised a “more
flexible approach” to streamline approval of injection projects, including approval of
_________________________________________________________________________________
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1
“replacement wells.” He described “replacement wells” as the wells drilled in an oil field
2
after the failure of an older well. DOGGR presumably would want to know about the
3
well failure to require remedial action.
4
5
144.
email sent by John Geroch of DOGGR on February 14, 2012:
Case 1 – Location of Excess Cement: I informed Jim that we would give
VRU_152 and administrative pass on this well due to the potential for
cement to seal off the out annulus just below the TIZ and it appeared that
there could be a void within the annulus where the TIZ intersects, that
technically this well is bad, but due to the low risk, for this well we could
give it a pass in this instance.
6
7
8
9
Examples of the flexible approach to permitting showed up in the following
145.
This is believed to be one example of many decisions that were
10
discretionary nature and that should have resulted in environmental review under the
11
California Environmental Quality Act (CEQA). It did not result in such review. When
12
the state admitted on February 6, 2015 of this year it approved injections directly into
13
protected water, the State did not address its failure to comply with CEQA. Everyone
14
knew of this obligation.
15
146.
After their discussion about CEQA, on August 31, 2012, Nechodom emailed
16
to thank Oviatt for her support and noted that he was “delighted to have you and Kern Co.
17
as a partner (unindicted co-conspirator?).” (Emphasis added.) Oviatt agreed with
18
Nechodom in email – “We all have the same goal.”
19
147.
The Oil Companies, DOGGR, Brown, Nechodom, Kustic, Oviatt, their
20
various agents and employees, and their co-conspirators, formed the Enterprise to achieve,
21
through illegal means, the goal of maximizing profits (including county and state tax
22
revenue) by allowing the injection of salt water into fresh water in violation of the Safe
23
Drinking Water Act. The fundamental goal of the Enterprise and conspiracy was to
24
preserve and expand the ability to inject underground chemicals and toxic waste, thereby
25
expanding their oil production and maximizing profits, including tax revenues and funding
26
from federal sources, regardless of the impact on fresh water. This deprived the
27
Committee members of fresh water, fair opportunities to earn an income, and honest
28
government services.
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148.
1
DOGGR’s approval of improper permits resulted in the misuse of funds
2
provided by the U.S. to California to follow the mandates of the Safe Drinking Water Act
3
and protect fresh water. DOGGR ignored the regulations that require geological or
4
engineering studies. DOGGR approved permits to inject directly into fresh water.
5
DOGGR also approved permits to inject in areas where the salt water could easily travel
6
to nearby idle wells and up into fresh water.
149.
7
Defendants acted in concert with each other to further their fraudulent
8
scheme. Each Defendant has participated in the operation and management of the
9
Enterprise and has committed numerous acts to maintain and expand the Enterprise. This
10
Enterprise and conspiracy still continues to this day.
150.
11
Defendants also engaged in a widespread scheme to frustrate public scrutiny
12
by making false and deceptive statements and concealing documents (including
13
documents under the California Public Records Act. DOGGR and Defendants Brown,
14
Kustic, and Oviatt suppressed research, destroyed documents, and refused to provide all
15
information requested under the California Public Records Act. And Kustic quit using
16
emails to avoid creating any footprints about his actions. The State Oil & Gas Supervisor
17
last issued a full annual report for 2009, a 267 page document.4 DOGGR now only has 19
18
page draft reports for 2012 and 2013. There was no reason for DOGGR to withhold the
19
requested information. Employees at DOGGR continue and repeatedly use the telephone
20
and email systems to block disclosure of the information requested about contamination of
21
water.
22
151.
Before 2011, DOGGR issued no more than fifty (50) injection permits a
23
year. In 2012 alone, DOGGR issued 1,575 injection well permits. The oil companies did
24
not provide engineering studies, geological studies, or casing diagrams to show protection
25
of fresh water.
26
27
28
4
See, http://www.conservation.ca.gov/dog/pubs_stats/annual_reports/Pages/annual_reports.aspx.
_________________________________________________________________________________
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1
152.
Between 2000 and 2014, oil companies in California steadily increased
2
injections of salt water and ultimately increased salt water injections by 252%. The
3
amount of salt water injections in 2000 was 15 billion gallons. By 2014, the amount
4
injected was 38 billion gallons.
5
153.
Defendants also intimidated witnesses who complained about contamination
6
of fresh water. Lorelei H. Oviatt, Director of the Kern County Planning and Development
7
Department, knew of complaints. Oviatt’s position gave her extraordinary police powers
8
over farmers. She would arrange meetings between the farmers and DOGGR
9
representatives. When contamination concerns went beyond DOGGR, Oviatt threatened
10
the witnesses and delayed vital assistance needed to protect farmers. She tried to silence
11
any public concerns about contamination, expressing concern about “lengthy delays in oil
12
activities.”
13
I.
Aquifer Exemptions – Farmer Complaints
14
154.
The United States Environmental Protection Agency (EPA) had asked
15
DOGGR for an action plan by September 1, 2011, and in the process, they discussed the
16
status of exemption applications for certain aquifers under the Safe Drinking Water Act.
17
155.
In early 2012, the EPA emailed Kustic about the exemptions and the EPA’s
18
understanding of the exempt waters. DOGGR did not respond. The EPA asked on June
19
4, 2012 about the status.
20
156.
On June 7, 2012, Kustic assured the EPA via an email that DOGGR was
21
comparing their documents to the EPA documents, had a few questions, and would
22
“complete a review of any additional aquifers for possible exemption within the next 3
23
months.” Kustic assured the EPA that hydraulic fracturing had the media’s attention, but
24
“the bulk of our resources are going towards the UIC program improvements.”
25
157.
The EPA emailed Kustic on June 19, 2012, complaining about injections
26
into protected water. The Tulare Aquifer is “not currently exempt. However, this
27
formation is receiving injection from multiple Class II [salt water disposal] wells.” The
28
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1
EPA was “very interested in discussing the status of this aquifer/formation at your earliest
2
convenience.”
3
158.
Questions about the aquifer exemptions could not have come at a worse time
4
for Kustic – DOGGR had what appears to have been its first notice of contamination
5
problems in 2012.
6
159.
In the summer of 2012, farmers struggled with increasing levels of sodium
7
chloride (or salt) in their soil and water. The farmers learned from the local water board
8
that oil production activities near their farms increased the chloride levels to a degree that
9
exceeds the maximum contaminant levels set by Federal law.
10
11
12
160.
The farmers then contacted the local deputy working for DOGGR. He
reported to the farmers the salinity problems did not come from oil production.
161.
The farmers afterwards reported the contamination problems to the State Oil
13
& Gas Supervisor (Kustic) and his boss, the Director of the California Department of
14
Conservation (Nechodom) – they did nothing.
15
162.
California receives annual funding of $500,000 from United States
16
Environmental Protection Agency to protect fresh water. Yet there appear to be no
17
documents from DOGGR about any investigation into the complaints about water
18
contamination. At a minimum, there should have been documents in the injection well
19
files about the investigation.
20
163.
Kustic did not respond to the EPA audit until after the November 4, 2012
21
election and passage of Governor Brown’s tax initiative (Proposition 30). Kustic
22
mentioned none of the concerns expressed by the farmers about contamination.
23
164.
Instead, on November 16, 2012 (eighteen months after the EPA Audit
24
concluded the state was not complying with the Safe Drinking Water Act), Kustic sent a
25
letter to the EPA regarding the audit findings about the lack of areas of review or AOR’s.
26
Kustic wrote that the division “protects underground sources of drinking water
27
(USDW) and requires that all injection is confined to the approved zone of injection.”
28
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165.
1
When Kustic made this statement, he knew it was not true – the Oil
2
Companies injected directly into protected fresh ground water. The falsity was
3
demonstrated this year when DOGGR admitted that it approved permits for 532 wells that
4
inject into protected water.
5
J.
Withholding of Public Records and Secret Meetings
6
166.
The California Public Records Act states that the Legislature recognizes
7
“that access to information concerning the conduct of the people’s business is a
8
fundamental and necessary right of every person in this state.” See, Cal. Gov. Code §
9
6250.
10
167.
Brown required all requests to DOGGR under the California Public Records
11
Act to be handled by his office, at least as to requests regarding the terminations of Miller
12
and Chernow. The Brown administration withheld substantial amounts of information
13
from the public and redacted voluminous emails, even up to the filing of this complaint.
14
15
168.
be open to public scrutiny:
“It is the public policy of this state that public agencies exist to aid in the
conduct of the people's business and the proceedings of public agencies be
conducted openly so that the public may remain informed.
16
17
In enacting this article the Legislature finds and declares that it is the intent
of the law that actions of state agencies be taken openly and that their
deliberation be conducted openly.
18
19
The people of this state do not yield their sovereignty to the agencies which
serve them. The people, in delegating authority, do not give their public
servants the right to decide what is good for the people to know and what is
not good for them to know. The people insist on remaining informed so that
they may retain control over the instruments they have created.
20
21
22
This article shall be known and may be cited as the Bagley-Keene Open
Meeting Act.” See, Ca. Gov. Code § 11120 (emphasis added).
23
24
The Bagley-Keene Act of 1967 requires that all meetings of state agencies
169.
In 2011, the Oil Companies pressured Miller to participate in “Oil and Gas
25
Work Group” meetings to discuss these activities without public notice. Miller did not
26
participate.
27
170.
28
The meetings began again in 2012 when DOGGR and the Oil Companies
met in closed door meetings through the “Oil & Gas Workgroup.” Some members of the
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1
Enterprise would meet in advance of the meetings in local hotels including at the
2
Bakersfield Marriott.
3
171.
The first 2012 meeting was set up by Blair Knox of California Independent
4
Petroleum Association (CIPA). He emailed a list of individuals to participate from
5
Western States Petroleum Association (WSPA), CIPA, DOGGR, Occidental, and
6
Chevron, for a January 26, 2012 meeting. The agenda emailed by Knox suggests there
7
would be comments by Nechodom and updates about the injection program. There was
8
no public notice of this meeting on Department of Conservation or DOGGR’s website.
9
172.
CIPA also organized via email the next meeting with the Oil & Gas
10
Workgroup, which took place on May 17, 2012. The agenda emailed by CIPA suggests
11
there would be a “Road Map” or Strategic Plan from DOGGR.
12
173.
On May 23, 2012, CIPA also asked via email for a report from DOGGR that
13
would list all production by all other oil and gas companies in California. DOGGR has
14
not provided the underlying records or emails showing what they provided to CIPA in
15
response or what was then sent to other members of the Oil & Gas Workgroup.
16
174.
CIPA also organized the next meeting with the Oil & Gas Workgroup,
17
which was scheduled to take place on September 20, 2012. On August 31, 2012,
18
Nechodom emailed to invite Oviatt to attend this meeting.
19
175.
On October 8, 2012, Nechodom acknowledged via email the plans for Oil &
20
Gas Workgroup meetings and the need for a formal Memorandum of Understanding about
21
the workgroup. To date, DOGGR has not provided a copy of this agreement.
22
23
24
176.
CIPA also organized via email the next meeting with the Oil & Gas
Workgroup, which took place on January 9, 2013.
177.
CIPA also organized via email the 2013 meetings with the Oil & Gas
25
Workgroup, including the May 16, 2013 at Chevron’s offices and the August 29, 2013,
26
meeting. The August meeting would include a discussion of the aquifer exemptions – a
27
discussion kept from the public until 2015.
28
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1
2
3
K.
Back-Room Development of Hydraulic Fracturing Regulations
178.
Senator Fran Pavley introduced Senate Bill 4 (SB4) to require the disclosure
of the chemicals associated with hydraulic fracturing on December 3, 2012.5
179.
4
SB4 was awaiting a vote on the Assembly floor when Western States
5
Petroleum Association (WSPA) took several legislators to dinner on September 4, 2013.
6
WSPA paid for a dinner costing approximately $13,000 for Senators Lou Correa, Ron
7
Calderon, and Norma Torres, and Assembly members Cheryl Brown, Henry Perea, Rudy
8
Salas, Tom Daly, Bill Quirk, Jose Medina, Christina Garcia, Travis Allen, and Adam
9
Gray.
10
180.
After the dinner, on September 6, 2013, Assembly Member Adam Gray
11
introduced an amendment to SB 4. This revision allowed hydraulic fracturing activity to
12
continue for two years while California Environmental Quality Act review was conducted.
13
This reverses the normal environmental review process where the analysis is done in
14
advance to determine whether activity is safe. Hydraulic fracturing would not go through
15
advance analysis.
16
181.
When ultimately approved, SB4 defined hydraulic fracturing as an injection:
“a well stimulation treatment that, in whole or in part, includes the pressurized
injection of hydraulic fracturing fluid or fluids into an underground geologic
formation in order to fracture or with the intent to fracture the formation,
thereby causing or enhancing, for the purposes of this division, the production
of oil or gas from a well.” Cal. Pub. Res. Code § 3152 (emphasis added).
17
18
19
20
California’s underground injections control (UIC) program require oil companies to
21
provide casing diagrams, geologic mapping, and testing for leaks. See, e.g., CCR 1724.6
22
through 1724.10.
23
182.
The Oil Companies, however, took Kustic to dinner on November 5, 2013
24
where they discussed drafting of regulations to implement SB4 in furtherance of the goals
25
of the enterprise to increase their ability to hydraulically fracture oil wells while also
26
avoiding underground injection guidelines designed to protect water supplies.
27
28
5
See, http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml;jsessionid=
69c24590f5631a40b11c598f064b.
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1
183.
Kustic emailed AERA on November 25, 2013 regarding draft reports and
2
preliminary instructions under SB4 – Kustic sought their approval first. Kustic
3
acknowledged that AERA uses more well stimulation than any other company in
4
California and wanted AERA’s approval before going public. Kustic welcomed AERA to
5
share with other companies and asked for all comments by December 6.
6
184.
Other emails provided by DOGGR demonstrate that the Oil Companies had
7
advance notice of the regulations before they were made public, but DOGGR has withheld
8
the emails transmitting the regulations and the comments by the Oil Companies. For
9
example, California Independent Petroleum Association (CIPA) provided comments on
10
the draft regulations before they went public.
11
185.
On December 11, 2013, DOGGR under Kustic’s leadership released
12
proposed regulations and interim regulations under SB4 notable for many reasons
13
including that the regulations define hydraulic fracturing as exempt from the underground
14
injection regulations:
15
o
16
17
18
o
19
20
21
186.
Well stimulation treatments and underground injection projects are two
distinct kinds of oil and gas
production processes. ..CCR
1761(b)(1).
“Well stimulation treatments
are not subsurface injection or
disposal projects and are not
subject to Sections 1724.6
through 1724.10.” CCR
1780(b) (emphasis added).
The interim regulations completely
22
exempt “acid matrix stimulation treatments that
23
use an acid concentration of 7% or less.” CCR
24
§1780(a). This keeps most of the “typical”
25
fracturing outside the regulations. For example,
26
this photo from Chevron’s website describes
27
hydraulic fracturing and highlights there are only
28
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1
“.5% additives.”6 Exxon (one of the owners of AERA) similarly explains that it uses
2
concentrations of less than .5% in its internet descriptions of hydraulic fracturing (“fluids
3
comprised of 99.5% water and sand are pumped into the wellbore”).
4
5
187.
The regulations drafted by the Enterprise created a loophole not in SB4 or
approved by the Legislature.
6
L.
Oil Companies Conceal the Impact and Discipline Members
7
188.
The Oil Companies make sure that no company ever breaks ranks. If any
8
company agrees to government regulations demonstrating confinement of toxic waste – or
9
real protection of water supplies at specific well sites – the companies will face potential
10
liability both for past, present and future activities. The Enterprise also disciplines
11
members who break ranks. PXP told the Department of Conservation on March 29, 2011
12
that the industry was pressuring them not to follow the law or remediate problems
13
associated with wells that could contaminate the fresh water. Joe Ashely from Occidental
14
Petroleum told DOGGR on October 27, 2011 they had the information needed but were
15
told to not provide it to DOGGR.
16
189.
On March 15, 2013, Exxon Mobil CEO, Rex Tillerson joined in a lawsuit
17
with Dick Armey to prevent hydraulic fracturing activity approved in his neighborhood.
18
Tillerson admitted that constructing the wells and required water towers is “detrimental to
19
or endanger[ing] the public health, safety, morals, comfort, or general welfare,” from
20
“uses which substantially impair and diminish the uses, values and enjoyment of other
21
property in the neighborhood for purposes already permitted. ”7 Indeed, Tillerson asserted
22
that approval of such activities in his neighborhood would “mock the purpose of the
23
[town] zoning ordinance, the primary purpose of which is to protect the citizens.” The
24
media spotlight focused on this lawsuit in February of 2014. Shortly thereafter, Tillerson
25
dropped out of the lawsuit.
26
27
28
6
See, http://www.chevron.ua/documents/en/frack_fluid_en.pdf.
Armey v. Bartonville Water Supply Corp., Dist. Court of Denton Co., Tex., Case No. 2012-30982-211.
_________________________________________________________________________________
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Case 2:15-cv-04149 Document 1 Filed 06/03/15 Page 38 of 50 Page ID #:38
1
2
M.
Deceptive Marketing by the Enterprise
190.
The Oil Companies created a marketing campaign to ensure the public
3
repeatedly heard false and misleading positions on issues related to injection wells, water
4
contamination, and fracking. The associates of the Enterprise denied that hydraulic
5
fracturing causes any damage. The Enterprise members claim hydraulic fracturing: (1)
6
happens deep underground; (2) is far from fresh water; (3) has been happening for
7
decades; and (4) include casings to protect water.
8
191.
To discredit any criticism of the practice, Western States Petroleum
9
Association (WSPA) and California Independent Petroleum Association (CIPA) prepared
10
and distributed through electronic wires and the internet Hydraulic Fracturing “Fact
11
Sheets.” For example, the WSPA Fact Sheets states that DOGGR “requires all wells to
12
meet strict construction and design requirements to ensure the maximum protection of
13
ground water supplies.”
14
192.
The Oil Companies and their co-conspirators repeatedly deny that hydraulic
15
fracturing causes damage to the water supply. They reassure the public in commercials, in
16
public announcements, and on the internet by pointing out the casings installed to protect
17
groundwater.
18
19
193.
type of underground injection, hydraulic fracturing:
“Chevron takes steps to protect groundwater during hydraulic fracturing and
over the life of the well. Designing proper wells and control systems is the
best form of prevention, and Chevron’s wells are designed to protect
groundwater for the life of the well. We have robust well designs with multiple
layers of steel and cement specifically designed to protect groundwater. We run
pressure tests to ensure the well’s integrity and conduct a combination of tests
over the life of the well to verify long-term integrity.” (Emphasis added.)
20
21
22
23
24
Chevron utilizes electronic wires to tell the public about the safety of one
194.
Chevron further stated on the internet that “Safety is not just a priority, it’s
25
part of our culture. First and foremost is the safety of the people on location and process
26
safety – in every task we perform. Environmental protection and operating in a
27
sustainable manner are paramount. It all starts with a robust well design.” Chevron,
28
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1
however, is one of the operators directly injecting contaminated water into protected
2
drinking water. These statements by Chevron are false.
3
195.
Occidental represents on the internet that hydraulic fracturing is safe, further
4
claiming that it is committed to public disclosure of all hydraulic fracturing operations and
5
stating that it is “conducting hydraulic fracturing in a manner that does not impact the
6
environment.” Occidental also represents on the internet that “produced water is returned
7
to its original source in deep geologic reservoirs.” These statements are not true –
8
Occidental’s subsidiary in California was fined because it was caught dumping produced
9
water into an unlined sump next to an almond orchard in Kern County.
10
196.
To further and protect the Enterprise and conspiracy, and their profits, the
11
Oil Companies made false and misleading statements to the public through press releases,
12
advertising, and public statements intended to be heard by the public.
13
197.
The Oil Companies also seek to create doubt about the risks of hydraulic
14
fracturing by claiming, it has been done for sixty years, disregarding new technological
15
innovations that allow oil companies, in recent years and at increased frequency, to use
16
hydraulic fracturing to stimulate oil from previously inaccessible shale rock. Hydraulic
17
fracturing is being utilized at deeper levels and at a higher pressure than any time in
18
history.
19
198.
The new technologies are now proving insufficient to reaching the Monterey
20
Shale Oil. The U.S. Energy Information Administration admitted these difficulties in
21
2014 when it reported that fracking was not resulting in success for reaching oil in
22
California.
23
199.
Even in the face of this information from the EIA, the Oil Companies
24
continue to misrepresent to the public that fracking has been done for decades without
25
problems to water. And the Oil Companies are avoiding regulation by redrafting
26
legislation intended to protect water. The associates of this Enterprise repeatedly made
27
various public statements, utilized print and video advertisements, promotions and other
28
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1
media as part of a concerted and coordinated campaign to put a good face on hydraulic
2
fracturing and oil production.
3
N.
Impact – Contaminated Water, Sink Holes, and Gas Leaks
4
200.
California business owners who depend on fresh water from the California
5
aqueduct face the risk of a loss of water supplies, forcing either drilling for new water
6
wells, installation of expensive remediation equipment, or finding clean water from other
7
sources.
201.
8
The Committee bringing this suit includes farmers and employees directly
9
affected by this conduct, collectively referred to as “Plaintiffs.” The Committee members
10
bring this action to recover lost income and revenue and costs paid for, and to be paid for,
11
the remediation of environmental damage caused by the Oil Companies. Plaintiffs also
12
seek a declaration revoking the illicitly obtained permits and requiring compliance with
13
the laws designed to protect the air, land, and water. Plaintiffs also seek to restrain the Oil
14
Companies and their co-conspirators from further violations of the law and to disgorge
15
their profits from this unlawful conduct.
16
O.
Senate Investigation
17
202.
In January of 2015, DOGGR was forced to admit it was allowing the oil
18
companies to directly inject contaminated salt water into drinking water. There were over
19
458 wells injecting directly into protected water.
203.
20
News reporters broke the story that DOGGR allowed the oil companies to
21
inject upwards of 6 billion gallons of contaminated water into fresh water in 2014 alone.
22
It is believed the amount injected into wells without proper AOR’s greatly exceeds that
23
amount. 46% of those injection wells received permits in the prior four years from
24
DOGGR.
204.
25
Faced with these reports about the underground injection control UIC issues,
26
Western States Petroleum Association (WSPA) responded that “the system works pretty
27
well.”
28
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1
205.
California Senator Fran Pavley then convened a hearing before the
2
California Senate on March 10, 2015. The stated purpose of the hearing was to assess the
3
underground injection control (UIC) program in California.
4
5
206.
stated that the focus in Spring 2012 turned to hydraulic fracturing.
6
“By spring of 2012, it was quite clear that the administration and the
legislature expected our department to be fully engaged in hydraulic
fracturing.”
7
8
On March 10, 2015, Nechodom took the stand at the Senate hearing and
207.
This was not how Kustic described the status of the underground injection
9
control (UIC) program to the United States Environmental Protection Agency on June 7,
10
2012. Kustic reassured the opposite:
11
“Although, hydraulic fracking stimulation is gathering much attention in the
media, . . . the bulk of our resources are going towards the UIC program
improvements.”
12
13
208.
Nowhere in Nechodom’s prepared statement to the Senate did he mention
14
that the Oil Companies refused to provide the geological studies that would have shown
15
the location of protected water. Nowhere in his statement did he acknowledge the refusal
16
to provide engineering studies. He instead focused on what the media considered
17
important in 2012, not what DOGGR considered important when it reassured the EPA of
18
improving the UIC program. Nechodom’s testimony was false and misleading, done to
19
cover-up the violations of the Safe Drinking Water Act that should have led to
20
indictments.
21
P.
Present and Continuing Threat
22
209.
The conspiracy by the Enterprise to deceive, mislead, and withhold
23
information from the public, and from public legislative, regulatory, and judicial bodies
24
about the adverse consequences of underground injection activities has continued up
25
through the present day.
26
27
210.
Each day, the Oil Companies continue to submit applications for permits
that do not comply with basic regulations to protect our water. The Oil Companies,
28
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1
continue to engage in a misinformation campaign where they suggest that they comply
2
with the regulations governing the proper design and installation of casings.
3
211.
DOGGR, adopted emergency regulations that allow continued injection into
4
the aquifer by the Oil Companies as part of the “Aquifer Exemption Emergency
5
Rulemaking.” DOGGR claims an emergency existed because it: “could not have
6
implemented a rulemaking process for the presently-proposed regulation prior to that date
7
because until then there had not yet been a determination of what deadlines would satisfy
8
US EPA’s demands for corrective action.” DOGGR further states it “and US EPA have
9
historically (up until about 2012) treated these eleven aquifers as exempt (hereinafter the
10
“Eleven Aquifers Historically Treated as Exempt”), and the Division has approved
11
injection wells into these aquifers.” Yet DOGGR had known since 2011 of the violations
12
of California regulations.
13
212.
DOGGR is still being controlled behind the scenes by Brown. After Kustic
14
retired, the Oil Companies resorted again to use of wires and mail to again complain about
15
job losses, threatening the new State Oil & Gas Supervisor (Dr. Steve Bohlen). As long as
16
Brown controls the political appointment process, there is a risk of continuing harm and
17
further terminations of employees whose job requires that they protect California water
18
from contaminated waste water.
19
213.
The effects of the conspiracy will be felt for many years into the future, and
20
the contamination of water will be time consuming and difficult to remediate. Unless
21
restrained, the potential contamination will undermine water quality in our most important
22
agriculture community for years to come.
23
214.
The farmers bringing this suit have already experienced the impact of the
24
injection wells – chloride levels in the soil and water are elevated because of these
25
operations. The increase is damaging the crops because chloride ions, which are a
26
component of salt, are readily absorbed by plant roots and then accumulate in plant leaves
27
at toxic levels. The chloride cannot be leached from the fruit and nut trees growing in the
28
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1
Valley. Toxic levels of chloride magnify the drought conditions, putting the farmers and
2
the nation at risk.
3
215.
Western States Petroleum Association (WSPA) implements the decisions of
4
the Enterprise, occupies a position in the chain of command in the Enterprise, is provided
5
with millions of dollars by the Enterprise associates to accomplish its goals, and is vital to
6
disseminating the “party line” on issues like regulations of injection well activities and
7
fracking. Through WSPA, the Oil Companies regularly met and set policy, including the
8
misleading and fraudulent statements described in this Complaint.
9
216.
WSPA also worked through attorneys to cloak all communications with the
10
attorney client privilege and thus withhold information demonstrating the fraudulent
11
nature of their communications.
12
13
14
15
16
17
FIRST CAUSE OF ACTION
RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT
(RICO)
18 U.S.C. §§ 1962(c), 1962(d), 1964
217.
Plaintiffs incorporate by reference all of the preceding paragraphs as though
fully set forth herein.
218.
As early as September 27, 2011, and continuing up to and including the date
18
of filing this complaint, the Enterprise did unlawfully, knowingly and intentionally
19
conduct, participate, directly and indirectly, in the conduct, management and operation of
20
the affairs of the Enterprise, and the activities of which affected interstate commerce,
21
through a pattern of racketeering activity consisting of numerous acts in California and
22
elsewhere, including, but not limited to, violations of 18 U.S.C. sections 241, 1341, 1343,
23
1346.43, 1512 (b) and 1513(b).
24
219.
Defendants Brown, Nechodom, Kustic, Oviatt, DOGGR, WSPA, CIPA,
25
OCCIDENTAL OIL AND GAS CORPORATION, CHEVRON U.S.A. INC., and others
26
known and unknown, being persons employed by and associated with the Enterprise did
27
unlawfully, knowingly, and intentionally conduct and participate, directly and directly in
28
the conduct, management, and operation of the affairs of the Enterprise, which was
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1
engaged in and affected interstate and foreign commerce through racketeering activity that
2
included numerous acts indictable under 18 U.S.C. § 371 (conspiracy to defraud the
3
United States); 18 U.S.C. §§ 241 (intimidation of any person engaged in free exercise of
4
speech or any Constitutional right); 1341 (mail fraud) , 1343 (wire fraud), 1346.43 (honest
5
services), 1512 (b) (intimidating and threatening witnesses), and 1513(b) (intimidating and
6
threatening witnesses).
7
o
Brown, Nechodom, Kustic, & Oviatt had a duty to provide honest
services, utilizing federal funds designated for use in protecting fresh
water to actually protect fresh water by enforcing California regulations
under the Safe Drinking Water Act. They breached those duties by
utilizing mail and wire fraud to deprive Californians of compliance with
the Safe Drinking Water Act.
o
The Oil Companies sent fraudulent communications via mail and
electronic wires, in violation of 18 U.S.C. §§ 1341 and 1343, repeatedly
suggesting that Miller was imposing new regulations, and suggesting
they complied with regulations designed to protect fresh water.
o
The Oil Companies utilized mail and electronic wires in violation of 18
U.S.C. §§ 1341 (mail fraud) and 1343 (wire fraud), to tout the safety of
fracking, describing the casings purportedly used to protect fresh water
and yet refusing to even provide evidence of adequate casings to get
permits for the injection wells from DOGGR.
o
Brown utilized wire communications through Cliff Rechstaffen and
violated 18 U.S.C. §§ 241, 1305, 1341, 1343, 1512, and 1513, by
threatening Miller and Chernow and ultimately terminating them in
retaliation for their refusal to violate the Safe Drinking Water Act.
o
Oviatt sent wire communications joining in the conspiracy and
threatening witnesses and obstructing the right of farmers to petition the
courts for relief from water contamination in violation of 18 U.S.C. §§
241, 1512, 1513.
o
Kustic sent wire communications promising to be “flexible” in
permitting wells that he knew violated the Safe Drinking Water Act and
utilized the telephone then in coordinating with other members of the
Enterprise to fast-track permit decisions.
o
Brown required that DOGGR withhold evidence, destroy documents,
and/or refuse to provide documents in response to Public Records Act
requests.
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
220.
In callous disregard to the family of Mr. Taylor who died in an oilfield
26
(where Chevron disregarded the UIC regulations), Governor Brown said, “There will be
27
indictments and there will be deaths. But we're going to keep going.”
28
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1
221.
What Brown did not disclose in this remark was that, after the termination of
2
Miller and Chernow, his office seized control of responding to Public Records Requests
3
served on DOGGR. Thus, Brown’s team would withhold the evidence of the continued
4
permitting of injection wells.
5
222.
The Enterprise, and in particular the Oil Companies, knowingly and
6
intentionally devised an advertising and marketing schedule to obtain money and property
7
with false representations about the safety of their injection activities. The Enterprise
8
further made knowingly false statements in the mail and wires, at hearings and in other
9
public appearances as part of a concerted and coordinated campaign to induce public
10
acceptance of their representations about fracking, to avoid civil liability, and to conceal
11
their efforts to misrepresent, suppress, distort, and confuse the facts.
12
223.
These predicate acts resulted in: depriving the Committee of honest
13
government services with the termination of regulators seeking to follow the law (Miller
14
& Chernow) and hiring of regulators to break the law (Kustic); deprived members of the
15
Committee of the right to petition and recover damages for contamination of their
16
property; deprived the public of truthful information about fracking and injection wells;
17
violated California Public Resources Code regulations under the Safe Drinking Water Act.
18
These unlawful schemes all constitute “predicate acts” under 18 U.S.C. § 1961.
19
224.
Each member of the Enterprise either committed or agreed that at least two
20
of the predicate acts would be committed by a member of the conspiracy in furtherance of
21
the Enterprise. It was part of the conspiracy that Defendants and their co-conspirators
22
would commit numerous acts of racketeering activity in the conduct of the affairs of the
23
Enterprise, including, but not limited to the acts of racketeering set forth herein.
24
225.
These predicate acts are related because they had common purposes and
25
goals to further the goal of the Enterprise to maximize profits, increase tax revenues, and
26
avoid the consequences of the contamination of fresh water. Each Defendant has
27
participated in the operation and management of the Enterprise including by engaging in
28
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1
acts of discipline and retaliation against any government employee who tried to protect the
2
water and any farmer who complained about the contamination.
3
226.
Defendants, individually or collectively, have engaged and are engaging in a
4
continuing and related pattern of racketeering activity within the meaning of 18 U.S.C.§
5
1961(5), which poses a threat of continued unlawful activity. Defendants’ unlawful acts
6
constitute a “pattern of racketeering activity,” in that there is a threat of continued
7
unlawful activity. With respect to each of the Defendants, the pattern of unlawful activity
8
at least has close-ended continuity in there was a closed period of repeated acts covering
9
at least a period from September 2011 to the present.
10
227.
As a direct and proximate result of the participation in and conduct of the
11
affairs of the Enterprise alleged herein by Defendants through a pattern of racketeering
12
activity in violation of 18 U.S.C.§ 1962 (c), Plaintiffs have been injured in their business
13
and property, and are entitled to all remedies available under the law and at equity.
14
228.
Defendants, acted with a callous disregard to quality of water needed by all
15
Californians including Plaintiffs for growing food used to feed the nation. Indeed, 25% of
16
all table food in the United States is grown in the San Joaquin Valley. Failing to follow
17
basic regulations and to instead cloaking all communications with the cover of privacy
18
demonstrates a callous disregard to the health, safety, and life all of all Californians.
SECOND CAUSE OF ACTION
V IOLATION OF THE C IVIL R IGHTS A CT OF 1871
42 U.S.C. § 1983
19
20
21
22
23
229.
Plaintiffs incorporate by reference all of the preceding paragraphs as though
fully set forth herein.
230.
Members of the Committee are owners and have a beneficial interest in
24
property in Kern County used for farming. These farms are near injection wells operated
25
by the Oil Companies in such a way as to knowingly inject salt water into fresh water used
26
for irrigating crops. These members have a constitutional right to own property under the
27
Fifth Amendment and to engage in protected activities to petition for grievances under the
28
First Amendment.
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1
231.
Brown is the Governor of the State of California, and all actions done by
2
him are under color of law including demands that the State Oil & Gas Supervisor
3
approve injection wells directly into or near fresh water. Occidental told analysts and
4
investors in May of2014 that “towns don’t want us there, we won’t be there.” But the
5
Occidental CEO did not disclose that Brown is the one who intervenes to make it happen.
6
Brown calls local politicians, like the Mayor of Carson, to remove moratoriums on drilling
7
by Occidental because of local concerns about hydraulic fracturing.
8
232.
Nechodom is the Director of the California Department of Conservation, and
9
all actions done by him are under color of law including setting policies to permit
10
injection wells directly into or near fresh water.
11
12
13
233.
Kustic was the State Oil & Gas Supervisor, and all actions done by him are
under color of law including permitting of injection wells directly into or near fresh water.
234.
Oviatt is the Director of the Kern County Planning Commission, and all
14
actions done by her are under color of law to block farmers from complaining about
15
contamination. Oviatt also intervened to protect oil companies from a temporary
16
moratorium on hydraulic fracturing in Arvin.
17
18
19
235.
DOGGR is a government agency whose main office is in Sacramento,
California. All actions by DOGGR are done under color of state law.
236.
The Oil Companies conspired with Oviatt, Brown, Nechodom, and Kustic,
20
to deprive farmers of their property and their right to petition the government when
21
noticing contamination problems. The Oil Companies participated in confidential
22
meetings to protect from disclosure their roles in blocking the farmers from expressing
23
concerns about water quality.
24
237.
Brown, Nechodom, Kustic, Oviatt, and DOGGR working with other
25
members of the Enterprise participated in the conspiracy to deny Plaintiffs of their rights
26
under the First and Fifth Amendments of the United States Constitution and to free access
27
to information under California Public Records Act, the Bagley-Keene Act, and the
28
Brown Act. Such overt acts are described above and include, among other items,
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1
threatening witnesses and farmers affected by the contamination of fresh water who
2
sought government protection and honest services.
3
238.
DOGGR’s policy to permit salt water injection wells without proper AOR’s
4
constitutes a regulatory taking because such contamination diminishes the value of the
5
farms in violation of the right to due process under the Fifth Amendment. This
6
deprivation of clean water is also in violation of Safe Drinking Water Act.
7
239.
Under 42 U.S.C. section 1985(3), each of the members of the Enterprise
8
engaged in a conspiracy to violate the constitutional rights of the farmers and engaged in
9
overt acts to further that conspiracy, which resulted in these injuries.
10
11
240.
There is no further remedy at law and irreparable injury to the farmers if
equitable relief is not sought.
PRAYER FOR RELIEF
12
13
WHEREFORE, Plaintiffs requests relief against Defendants:
14
A.
15
16
A judgment in favor of Plaintiffs on all claims and disgorgement of all ill-
gotten profits;
B.
An award for threefold the actual damages Plaintiffs sustained because of
17
Defendants’ violations of 18 U.S.C. §§ 1962(c) and (d) and the costs, including attorneys’
18
fees, incurred by Plaintiffs in prosecuting RICO claims against RICO Defendants;
19
C.
An award to Plaintiffs for the damages proven at trial;
20
D.
An award to Plaintiffs for punitive damages;
21
E.
An injunction against DOGGR mandating that it provide all requested
communications and removing all redactions of information;
22
23
F.
studies and engineering studies to make sure groundwater is protected;
24
25
An injunction against DOGGR mandating that it require all geological
G.
An injunction against the Oil Companies against any false, misleading or
26
deceptive statements or representations concerning the safety of oil
27
production or nonconventional well stimulation activities;
28
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H.
1
An injunction against the Oil Companies from participating in any Oil &
Gas Workgroup;
2
I.
3
An injunction against the Oil Companies from engaging in any public
4
relations endeavor that misrepresents or suppresses information concerning
5
the health risks and environmental risks associated with oil production or
6
nonconventional well drilling activities and from associating with any other
7
persons for the purpose of engaging in such conduct.
I.
8
An injunction against Defendants to prevent further harm to Plaintiffs and to
9
include provisions for further ongoing monitoring of Plaintiffs’ properties
10
and potential remediation by Defendants;
J.
11
An injunction mandating that each Defendant disclosure, disseminate, and
12
provide to the public all documents relating to research previously
13
conducted directly or indirectly by themselves and their respective agents
14
and affiliates that relate to the health and environmental consequences of oil
15
production and nonconventional well stimulation, and the ability to develop
16
less hazardous means to dispose of contaminated water;
K.
17
Creation of a fund to correct all misinformation, including a fund
18
administered and controlled by an independent third party relating to the
19
public health and environmental issues associated with oil production and
20
nonconventional well stimulation;
21
L.
For reasonable attorneys’ fees according to proof;
22
M.
For interest at the legal rate on all amounts awarded;
23
N.
For costs of suit incurred; and
24
O.
Such other and further relief as this Court may deem just and proper.
25
////
26
////
27
////
28
////
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DEMAND FOR JURY TRIAL
1
2
Under Rule 38 of the F.R.C.P., Plaintiffs respectfully demand a jury trial.
3
4
DATE: June 3, 2015
REX PARRIS LAW FIRM
5
6
7
8
R. Rex Parris
Patricia K. Oliver
Attorneys for Plaintiffs
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
_________________________________________________________________________________
COMPLAINT
Page 49